What should I ask when I visit my dream condo?
June 25, 2006 6:53 PM Subscribe
Chicago real estate: Help me create a list of questions to ask a real estate agent as I see my (agent owned) dream condo.
I'm seeing what I believe to be my dream condo on Tuesday evening. It's 800 sf high-rise near Michigan Avenue, with a garden. Woo!
This would be my first home purchase. I live in an apartment in the area, so I really don't need any questions about the neighborhood answered. My concerns extend specifically to questions I should ask regarding this unit and the building itself.
The building was built in the mid 1980's as an apartment building and was converted to condos in 1993. This particular unit was rehabbed in 2003. I have little to no idea of what this rehab entailed - what sorts of plumbing, structural, or design "things" should I look for?
This unit is agent owned. What does this mean for me?
I know I should ask for the condo association financial statements - what am I supposed to look for?
This condo building is pet-friendly and has no weight limit on dogs. I told a friend this and she said that's cause for concern - why?
Also, any opinions you can offer on the Chicago (Streeterville/River East) real estate market would be helpful, as well. I just read last week's Crain's and while I'm concerned about the bubble bursting, I also feel ready to buy. However, I have done the research and it is a much better deal (by about $600) for me to rent rather than buy - even though I feel ready to buy, should I hold off? I just don't want to play the waiting game and lose my dream location just because I'm too chicken to take a financial risk. I am very lucky in that I can afford either the mortgage payment or the rent (meaning, I have the spare $ if I decide to buy).
In short, I really need to know what sorts of questions I should ask to 1) look like an intelligent home buyer, 2) really get a great idea of what I'm getting into and 3) don't get ripped off.
I'm seeing what I believe to be my dream condo on Tuesday evening. It's 800 sf high-rise near Michigan Avenue, with a garden. Woo!
This would be my first home purchase. I live in an apartment in the area, so I really don't need any questions about the neighborhood answered. My concerns extend specifically to questions I should ask regarding this unit and the building itself.
The building was built in the mid 1980's as an apartment building and was converted to condos in 1993. This particular unit was rehabbed in 2003. I have little to no idea of what this rehab entailed - what sorts of plumbing, structural, or design "things" should I look for?
This unit is agent owned. What does this mean for me?
I know I should ask for the condo association financial statements - what am I supposed to look for?
This condo building is pet-friendly and has no weight limit on dogs. I told a friend this and she said that's cause for concern - why?
Also, any opinions you can offer on the Chicago (Streeterville/River East) real estate market would be helpful, as well. I just read last week's Crain's and while I'm concerned about the bubble bursting, I also feel ready to buy. However, I have done the research and it is a much better deal (by about $600) for me to rent rather than buy - even though I feel ready to buy, should I hold off? I just don't want to play the waiting game and lose my dream location just because I'm too chicken to take a financial risk. I am very lucky in that I can afford either the mortgage payment or the rent (meaning, I have the spare $ if I decide to buy).
In short, I really need to know what sorts of questions I should ask to 1) look like an intelligent home buyer, 2) really get a great idea of what I'm getting into and 3) don't get ripped off.
Response by poster: Bjkokenos - I don't have my own agent - do I really need one? I found this place on the internet. I do have a real estate attorney (a law school classmate) so I am set on the legal side of things.
I plan on being in this condo for at least the next 3 years, barring some unforeseen circumstance. I would figure the maximum time I'd want to spend there is about 5 years, though, as inevitably I'd want more than just 1 bedroom.
posted by MeetMegan at 7:06 PM on June 25, 2006
I plan on being in this condo for at least the next 3 years, barring some unforeseen circumstance. I would figure the maximum time I'd want to spend there is about 5 years, though, as inevitably I'd want more than just 1 bedroom.
posted by MeetMegan at 7:06 PM on June 25, 2006
I don't know much about buying condos, but I live in one rented from an individual owner in a high-rise in Chicago. Right now things are sort of cranky between the association and the owners because the original contractors didn't do something that is needing major construction to retrofit now, and it's going to end up costing the owners more in assessments. So if I were in your position, I'd ask about assessment costs and financial statements of what the association has already spent.
With regards to dog size, I'm not sure how this is a bad thing, necessarily. We have a 60lb stocky medium-sized dog, and by condo association policy we only take her out back via the freight elevator. There haven't been issues at all. With the unit you're looking at buying, I'd try to assess if that particular unit has had any pets previously and if so, how well the apartment was cleaned/maintained as a result. I have no idea how that happens, if you can, though. I'd ask about the specifics of the pet policy if it is an issue, though.
posted by cajo at 7:11 PM on June 25, 2006
With regards to dog size, I'm not sure how this is a bad thing, necessarily. We have a 60lb stocky medium-sized dog, and by condo association policy we only take her out back via the freight elevator. There haven't been issues at all. With the unit you're looking at buying, I'd try to assess if that particular unit has had any pets previously and if so, how well the apartment was cleaned/maintained as a result. I have no idea how that happens, if you can, though. I'd ask about the specifics of the pet policy if it is an issue, though.
posted by cajo at 7:11 PM on June 25, 2006
If Illinois comissions work the same as Michigan comissions, you as a buyer should always use an agent. You see, in MI anyways, the person who is selling pays around 6% to his agent. His agent offers 3% to the buyers agent in order to get other agents to sell his listing. Meaning the seller pays both agents and the buyer gets his agent for free. If the same agent represents both the buyer and the seller he gets the whole 6%. This is called Dual Agency and is only legal if both parties agree to it in writing.
If it works the same there as here, you should definitely use an agent and they can really help you and tell you what questions to ask and so and so forth. if you would like I could refer you to a reputable agent in your area. You can find my email in my profile if you would like to contact me and i could have someone contact you by tomorrow morning.
posted by Bjkokenos at 7:15 PM on June 25, 2006
If it works the same there as here, you should definitely use an agent and they can really help you and tell you what questions to ask and so and so forth. if you would like I could refer you to a reputable agent in your area. You can find my email in my profile if you would like to contact me and i could have someone contact you by tomorrow morning.
posted by Bjkokenos at 7:15 PM on June 25, 2006
Response by poster: Bjkokenos - Thanks, that's very helpful. What are the implications of the agent owning the condo?
posted by MeetMegan at 7:18 PM on June 25, 2006
posted by MeetMegan at 7:18 PM on June 25, 2006
Well if you were to potentially going to get into a dual agency situiation with the other agent, it would kind of be a sticky situiation with him being the owner of the condo. He could mislead you on the value and / or many other things. Again, if Illinois is the same as here I would definitely use your own agent. If you had your own agent, he/she could do what is called a comparative market analysis and help you accurately gauge the value of the condo. Also, he/she could help you negotiate a better deal than if you were trying to negotiate with the other agent yourself. The owning agent could be a very ethical guy but as long as you can get the services of your own agent for free, I wouldn't risk it.
I could ask all of the agents in my office if anyone knows any good agents in chicago, but if no one does I have access to a list of agents across the country who go through a long list of criteria to be put on this kind of "preferred realtors" list and i could pass your info along to one of those agents if you would like.
posted by Bjkokenos at 7:30 PM on June 25, 2006
I could ask all of the agents in my office if anyone knows any good agents in chicago, but if no one does I have access to a list of agents across the country who go through a long list of criteria to be put on this kind of "preferred realtors" list and i could pass your info along to one of those agents if you would like.
posted by Bjkokenos at 7:30 PM on June 25, 2006
some background: i once worked for a sizable real estate firm in the chicago area, dealing mainly in condos, but i was not myself a real estate agent. i was, however, privy somewhat to the details of the business, and i can answer a few questions.
i would take "agent owned" to mean that it is owned by the association for whom the broker works. for example, if the building has its units sold through the xyz properties agency, then i would interpret this to mean that xyz bought the building, or rather the remaining unsold units, and is selling them directly. i don't think it's likely that the broker him or herself would own unit(s) to sell.
rehabs usually mean they upgraded some amenities. formica countertops turned into granite countertops. there's not too much you can do with a big high rise...if you have a half bath, i'm not sure it's too likely you can make that a full bath. but you sure can put in granite countertops. new carpeting, tile in the kitchen or bathrooms, track lighting, kitchen appliances or utilities -- these are all things i'd think of when people say "rehab". sometimes rehab can mean something like, there is a closet where one never was -- do ask what happened during the rehab. they did it to increase the price, so think about how much they're adding because of it (and if you feel it's worth it).
the condo association -- just look for bullshit. the association will organize the things you wouldn't think of if you were living in an apartment building. custodial services for public areas, trash removal (the city won't do it for large, multi-unit structures), landscaping if necessary, heating and cooling. all this can cost a fair amount, and it comes out of your "assessments" that you must pay. ask what your monthly assessment would be.
no weight limit pets -- well, as you might have guessed, that means large dogs are a possibility. rambunctious labradors: accepted. this may or may not be a problem for you. a modern building will have been mostly constructed of concrete with cinder blocks, and fairly sound proof, and so the cause for concern is somewhat mollified.
people make a big deal of the renting vs. buying difference. this matters a great deal to investors, people who buy condos with the intention of renting it to others. if you can't rent the unit but for $600 less than the mortgage, which probably wouldn't even include taxes/assessments, well--you'd move on. but as a home buyer, the important thing is if you like this place, you want to live there, and you have the financial means to take on the added burden of the mortgage.
investors want to make a quick buck, flipping the building in 2 or 3 years and profiting off of the appreciation. banks hate them, usually, because they make less money off of a mortgage that barely earns any interest. (the amount of time an investors stays is often tied to either a deal the selling agent offers or the length that their sweet interest percent on their ARM lasts.)
sorry -- that was fairly long.
here's the long and short of things. the first thing you should do is look at condo buildings in the area. compare selling prices with square footages offered. look, particularly, for units that have comparable features (such as the garden). if you can't, figure from the top of your head what that might be worth. keep in mind like aspects: when buildings were built, what amenities they offer, granite countertops (if you like that sort of thing), and so on. especially compare the assessments between the units you look at, since a lot of people don't talk or think about that when they buy -- but it will be a significant portion of your monthly commitment to your home. also, if you can, compare the taxes. as a rule of thumb, you will pay 1.8% of your home's appraised value per year (divide that by 12 for your monthly taxes). i think this is usually handled through your mortgage, though, but it can also be significant.
if the bubble bursts, downtown will still be an attractive place to live. so you will probably stand to make a good profit on your investment. maybe not as much if the bubble doesn't burst. i don't think appreciation will stop, but it may slow. the main thing is building equity, in my opinion. that gives you a lot of flexibility in choosing your next home -- when you should choose to move on.
good luck!
posted by moz at 7:45 PM on June 25, 2006
i would take "agent owned" to mean that it is owned by the association for whom the broker works. for example, if the building has its units sold through the xyz properties agency, then i would interpret this to mean that xyz bought the building, or rather the remaining unsold units, and is selling them directly. i don't think it's likely that the broker him or herself would own unit(s) to sell.
rehabs usually mean they upgraded some amenities. formica countertops turned into granite countertops. there's not too much you can do with a big high rise...if you have a half bath, i'm not sure it's too likely you can make that a full bath. but you sure can put in granite countertops. new carpeting, tile in the kitchen or bathrooms, track lighting, kitchen appliances or utilities -- these are all things i'd think of when people say "rehab". sometimes rehab can mean something like, there is a closet where one never was -- do ask what happened during the rehab. they did it to increase the price, so think about how much they're adding because of it (and if you feel it's worth it).
the condo association -- just look for bullshit. the association will organize the things you wouldn't think of if you were living in an apartment building. custodial services for public areas, trash removal (the city won't do it for large, multi-unit structures), landscaping if necessary, heating and cooling. all this can cost a fair amount, and it comes out of your "assessments" that you must pay. ask what your monthly assessment would be.
no weight limit pets -- well, as you might have guessed, that means large dogs are a possibility. rambunctious labradors: accepted. this may or may not be a problem for you. a modern building will have been mostly constructed of concrete with cinder blocks, and fairly sound proof, and so the cause for concern is somewhat mollified.
people make a big deal of the renting vs. buying difference. this matters a great deal to investors, people who buy condos with the intention of renting it to others. if you can't rent the unit but for $600 less than the mortgage, which probably wouldn't even include taxes/assessments, well--you'd move on. but as a home buyer, the important thing is if you like this place, you want to live there, and you have the financial means to take on the added burden of the mortgage.
investors want to make a quick buck, flipping the building in 2 or 3 years and profiting off of the appreciation. banks hate them, usually, because they make less money off of a mortgage that barely earns any interest. (the amount of time an investors stays is often tied to either a deal the selling agent offers or the length that their sweet interest percent on their ARM lasts.)
sorry -- that was fairly long.
here's the long and short of things. the first thing you should do is look at condo buildings in the area. compare selling prices with square footages offered. look, particularly, for units that have comparable features (such as the garden). if you can't, figure from the top of your head what that might be worth. keep in mind like aspects: when buildings were built, what amenities they offer, granite countertops (if you like that sort of thing), and so on. especially compare the assessments between the units you look at, since a lot of people don't talk or think about that when they buy -- but it will be a significant portion of your monthly commitment to your home. also, if you can, compare the taxes. as a rule of thumb, you will pay 1.8% of your home's appraised value per year (divide that by 12 for your monthly taxes). i think this is usually handled through your mortgage, though, but it can also be significant.
if the bubble bursts, downtown will still be an attractive place to live. so you will probably stand to make a good profit on your investment. maybe not as much if the bubble doesn't burst. i don't think appreciation will stop, but it may slow. the main thing is building equity, in my opinion. that gives you a lot of flexibility in choosing your next home -- when you should choose to move on.
good luck!
posted by moz at 7:45 PM on June 25, 2006
Bjkokenos, don't use askme to write leads.
If you do not want to be ripped off, before you look into an agent...
An independent real estate appraisal should cost you around $300, it is well worth your money. Your lawyer friend should be able to point you to an appraiser. (if not, hire one of these guys) Tell them you want the real market price for the property and you will be using their appraisal to determine what you should bid on the property. Tell them that the appraisal will not be used for anything else. Telling them all those things are important because there are many price conclusions that an appraiser can come to and still be well within ethics, much less the law.
It is also important that the appraisal be ordered by you. Not a bank, real estate agent or attorney.
The practical difference between an appraisal and a market analysis is that if the appraisal is incorrect, you can sue the appraiser and actually win.
posted by 517 at 9:08 PM on June 25, 2006
If you do not want to be ripped off, before you look into an agent...
An independent real estate appraisal should cost you around $300, it is well worth your money. Your lawyer friend should be able to point you to an appraiser. (if not, hire one of these guys) Tell them you want the real market price for the property and you will be using their appraisal to determine what you should bid on the property. Tell them that the appraisal will not be used for anything else. Telling them all those things are important because there are many price conclusions that an appraiser can come to and still be well within ethics, much less the law.
It is also important that the appraisal be ordered by you. Not a bank, real estate agent or attorney.
The practical difference between an appraisal and a market analysis is that if the appraisal is incorrect, you can sue the appraiser and actually win.
posted by 517 at 9:08 PM on June 25, 2006
As I re-read your question:
If you want to look like an intelligent buyer, after you take a look around and if the place meets your expectations, tell the agent that your appraiser will be calling them to set up an appointment for an inspection.
You could be asking the worst questions imaginable up to that point and still look like you know what you are doing because the agent will know that you are a serious buyer and that you won't be paying much, if any, over market value.
Also, you may find this useful.
posted by 517 at 9:57 PM on June 25, 2006
If you want to look like an intelligent buyer, after you take a look around and if the place meets your expectations, tell the agent that your appraiser will be calling them to set up an appointment for an inspection.
You could be asking the worst questions imaginable up to that point and still look like you know what you are doing because the agent will know that you are a serious buyer and that you won't be paying much, if any, over market value.
Also, you may find this useful.
posted by 517 at 9:57 PM on June 25, 2006
"Agent owned" means that if you buy directly from the seller, s/he saves 3% of the sales price. Hire your own appraiser & offer to pay the appraised value minus 2%.
posted by growabrain at 10:04 PM on June 25, 2006
posted by growabrain at 10:04 PM on June 25, 2006
Absolutely get your own agent, you need someone who is on your side in the negotiations, expecting one person to fairly represent both parties can be problematic. Especially if there are any disputes during escrow.
Always have a professional inspection done, your offer should be contingent upon this. That means you have the right to withdraw the offer if the inspector finds lots of expensive problems, or you can negotiate the price down to cover that cost, if you want.
If there is a homeowners association or management company, ask to see a copy of their rules and regs. You don't want any nasty surprises if it turns out they have some crazy rules about permitted garden furniture colors or length of grass. Also ask to see their financials, check there is a reasonable contingency fund in place, ask if there have been any recent assessments, what for, how much. Also what your monthly dues would be to the HOA, since you pay that on top of your mortgage payment.
Finally, don't rush into it if the market isn't insanely competitive. View a few other comparable places to make sure it really is "the one".
posted by Joh at 12:11 AM on June 26, 2006
Always have a professional inspection done, your offer should be contingent upon this. That means you have the right to withdraw the offer if the inspector finds lots of expensive problems, or you can negotiate the price down to cover that cost, if you want.
If there is a homeowners association or management company, ask to see a copy of their rules and regs. You don't want any nasty surprises if it turns out they have some crazy rules about permitted garden furniture colors or length of grass. Also ask to see their financials, check there is a reasonable contingency fund in place, ask if there have been any recent assessments, what for, how much. Also what your monthly dues would be to the HOA, since you pay that on top of your mortgage payment.
Finally, don't rush into it if the market isn't insanely competitive. View a few other comparable places to make sure it really is "the one".
posted by Joh at 12:11 AM on June 26, 2006
Response by poster: Ok, to be clear, I would never choose to use the agent who owns this unit as my agent - so, I guess my questions about needing an agent are really more about whether I can just arm myself with a proper assessment and still negotiate a competitive price. Is that possible?
posted by MeetMegan at 8:30 AM on June 26, 2006
posted by MeetMegan at 8:30 AM on June 26, 2006
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Also, were you planning on using the agent which owns the condo or do you have your own agent??
I am a realtor in the detroit area so I can't tell you much about the Chicago market, but it is definitely a big step to go from renting to buying. I would never recommend just buying for the sake of buying, but if you feel like you would be staying there for some time then it would be a good investment because even with the bubble bursting, it still makes financial sense to buy if you plan on living there for a long time.
posted by Bjkokenos at 6:59 PM on June 25, 2006